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Investment Abroad and Adjustment at Home: evidence from UK multinational firms

  • Helen Simpson

    ()

This paper provides new evidence on the effects of overseas FDI on the skill-mix of multinational firms’ home-country operations. The analysis exploits China’s WTO accession to identify the impact of outward investment into a low-wage economy, and uses plant-level data to investigate changes in industrial structure within firms driven by plant closures. As predicted by models of vertical FDI the paper demonstrates that overseas investment in low-wage economies is associated with asymmetric effects on workers in low and high skill industries in the home economy, and in particular with firms closing down plants in low-skill industries.

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File URL: http://www.bristol.ac.uk/cmpo/publications/papers/2008/wp207.pdf
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Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 08/207.

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Length: 34 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:bri:cmpowp:08/207
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  1. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
  2. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," CEP Discussion Papers dp0584, Centre for Economic Performance, LSE.
  3. Holger Görg & Eric Strobl, 2003. ""Footloose" Multinationals?," Manchester School, University of Manchester, vol. 71(1), pages 1-19, January.
  4. Andrew B. Bernard & J. Bradford Jensen, 2006. "Firm Structure, Multinationals, and Manufacturing Plant Deaths," Working Paper Series WP06-7, Peterson Institute for International Economics.
  5. Chiara Criscuolo & Ralf Martin, 2004. "Multinationals and U.S. Productivity Leadership: Evidence from Great Britain," OECD Science, Technology and Industry Working Papers 2004/5, OECD Publishing.
  6. Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers 2463, C.E.P.R. Discussion Papers.
  7. Elhanan Helpman, 1985. "Multinational Corporations and Trade Structure," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 443-457.
  8. N/A, 2004. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 189(1), pages 8-36, July.
  9. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  10. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
  11. Marc-Andreas Muendler & Sascha O. Becker, 2006. "Margins of Multinational Labor Substitution," CESifo Working Paper Series 1713, CESifo Group Munich.
  12. Griffith, Rachel & Redding, Stephen J. & Simpson, Helen, 2004. "Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab," CEPR Discussion Papers 4691, C.E.P.R. Discussion Papers.
  13. Head, Keith & Ries, John, 2002. "Offshore production and skill upgrading by Japanese manufacturing firms," Journal of International Economics, Elsevier, vol. 58(1), pages 81-105, October.
  14. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Entry, Exit and Establishment Survival in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 91-112, 03.
  15. repec:hrv:faseco:4784029 is not listed on IDEAS
  16. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2005. "Vertical Production Networks in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 664-678, November.
  17. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1375-1418.
  18. Alexander Hijzen & Holger Görg & Robert C. Hine, 2004. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Discussion Papers of DIW Berlin 437, DIW Berlin, German Institute for Economic Research.
  19. WHALLEY, John & XIN, Xian, 2010. "China's FDI and non-FDI economies and the sustainability of future high Chinese growth," China Economic Review, Elsevier, vol. 21(1), pages 123-135, March.
  20. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  21. Lee Branstetter & Nicholas Lardy, 2006. "China's Embrace of Globalization," NBER Working Papers 12373, National Bureau of Economic Research, Inc.
  22. David A. Riker & S. Lael Brainard, 1997. "U.S. Multinationals and Competition from Low Wage Countries," NBER Working Papers 5959, National Bureau of Economic Research, Inc.
  23. N/A, 2004. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 187(1), pages 8-35, January.
  24. Braconier, Henrik & Ekholm, Karolina, 2000. "Swedish Multinationals and Competition from High- and Low-Wage Locations," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 448-61, August.
  25. Linda Low & Eric D. Ramstetter & Henry Wai-Chung Yeung, 1996. "Accounting for Outward Direct Investment from Hong Kong and Singapore: Who Controls What?," NBER Working Papers 5858, National Bureau of Economic Research, Inc.
  26. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
  27. Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
  28. S. Lael Brainard & David A. Riker, 1997. "Are U.S. Multinationals Exporting U.S. Jobs?," NBER Working Papers 5958, National Bureau of Economic Research, Inc.
  29. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  30. Francesca Fabbri & Jonathan E. Haskel & Matthew J. Slaughter, 2003. "Does Nationality Of Ownership Matter For Labor Demands?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 698-707, 04/05.
  31. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages F416-42, June.
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